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Indian tech majors Infosys Technologies and Wipro are set to enter the booming domestic back-office service market, multiplying by more Top Indian outsourcing cos than one-third every year, and join a tech revolution happening in rural India.
Infosys BPO, the USD316-million back-office service arm of Infosys, plans to tie up with service providers with shops in rural areas and small towns for its domestic operations, company officials said. The revenue-share model will see Infosys getting the customers and the rural operators doing the service. The USD395-million Wipro BPO too will enter the domestic market soon. It already provides technology and other supports to a few rural service providers and may also explore service delivery tieups with them, company officials said.
So far, both the firms have been servicing only global clients. But, with global demand falling (Nasscom revised the growth to around 16% a year from around 25% earlier) due to the downturn in the US and other western economies, the domestic market, estimated at USD1.6 billion and growing at an annual compounded rate of 38%, has gained a momentum.
Now going to remote, rural areas could be the next big shift to offer everything from native language capabilities to data entry type services.
The idea is the same as moving jobs from the US to India - to cash in on cheaper talent and office space. Amitabh Chaudhry, CEO and MD of Infosys BPO, says, Tying up with rural service providers will keep our gross margins from domestic business similar to those from international business (22-24%).’’
The average billing rate for domestic clients is just USD3-4 per hour for every employee, compared with USD8-12 offered by global clients. This makes offering services to domestic clients from metros and big cities almost unviable.
Hence the move to rural areas that are some 60% cheaper. For instance, in a tier 1 city, a fresher gets about Rs 8,000, while in a tier III city it is around Rs 3,500, and even less in villages.
At present there are about a dozen rural BPO players including RuralShores, HOV Services, Sai BPO and DesiCrew in India, accounting for just a fraction of the domestic industry.
Tie-ups with the likes of Infosys and Wipro will help these small startups attract big clients in mobile phone and banking industries that are making major inroads into rural markets.
We are talking to some big companies for partnerships, says Murali Vullaganti, CEO of RuralShores, a 12-month-old startup that gets technical support from Wipro.
It makes sense for rural BPOs to look at tieups as they may not be able to bag large contracts on their own, says Chaudhry. Besides revenue share, we will also train people in villages and tier II, III towns, he adds.
These centres do routine tasks like data entry, processing of utility bills, native language help desk and e-mail response, says Avinash Vashistha, CEO of Bangalore-based advisory firm Tholons. They are, however, not expected to scale up dramatically. That’s because, while the manpower is cheap its availability is extremely limited. There are other limitations like lack of skilled manpower, poor broadband connectivity and frequent power blackouts.
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